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Mr. OWEN. I don't believe that there was any stock actually issued.
Mr. Tulloss. I don't know where that stock is. It is suggested that there really was no stock actually issued, that the records merely showed that. I don't know the present status of it.
Representative WOLVERTON. Do they hold annual meetings of that corporation?
Mr. TULLOSS. We do not know, we haven't made an examination currently on this activity.
Representative WOLVERTON. When did you lose track of the Tennessee Valley Associated Cooperatives? · Mr. OWEN. We pick up items, and the officers being the same, we make inquiry, at each audit, but we do not audit the T. V. A. C. books now, so that on pertinent items about the T. V. A. C. we are not so well informed.
Representative WOLVERTON. Well, in your audit of the Tennessee Valley Authority, you ascertained from an item of expenditure that the Tennessee Valley Authority was interested in the cooperative corporation?
Mr. OWEN. Yes, sir. Representative WOLVERTON. As a result of that you looked into it and found that it had the same officers as the Tennessee Valley Authority.
Mr. OWEN. Yes, sir.
Representative WOLVERTON. You also ascertained that it had 100 shares of common no-par-value stock held by Arthur Morgan, and Harcourt Morgan, and David Lilienthal, for and on behalf of the United States.
Mr. OWEN. Yes.
Representative WOLVERTON. It also appears that $300,000 came into the treasury of the Tennessee Valley Associated Cooperatives. Do you mean to say that after having ascertained those facts, that in the years that have followed there has been no audit of the Tennessee Valley Associated Cooperatives, notwithstanding the fact that it is held," the stock of which is held by the directors of the Tennessee Valley Authority, in behalf of the United States.
Mr. Tulloss. I would not be able to say just what took place after this fiscal year. Our report for the next year is in process of preparation, but your question may be answered there, but there is this distinction:
These moneys, as I understand that, were advanced to the T. V. A. C.; they were moneys appropriated for relief purposes, and our principal objective here was to show the transactions as related, as appearing on the books of the T. V. A. rather than to perpetuate that as an agency of the T. V. A.
In other words, it occurs to me that there was a basis, there was a proper basis for separation. These were relief moneys granted to the State of Tennessee.
Representative WOLVERTON. Now, I have difficulty in understanding that statement when I look at the statement which is contained in the general accounting report at page 111, which is the report of the Tennessee Valley Associated Cooperatives, and under the heading, "Estimated value of physical properties of organizations,” that receive this so-called relief help from the Tennessee Valley Cooperatives, there is a value placed upon it of $271,200, so that even though it may be for relief, it was not in the sense that most of us understand relief, to worthy individuals, but it must have been to corporations, because it has a physical value of $271,200.
Mr. Tulloss. The list of projects here, as I understand, were relief activities, and this is a statement showing the value of the properties, estimated value of their properties.
I do not understand this to mean that this is a property of the Tennessee Valley Authority except to the extent that it may have a claim upon the property for any advances that it made to the Tennessee Valley Associated Cooperatives.
Representative WOLVERTON. My interest in this is from the standpoint that the Tennessee Valley Associated Cooperatives is an agency of the Tennessee Valley Authority, and it appears in existence by reason of its incorporation in January of 1934, but I haven't been able to trace what has happened to it since that time.
That is notwithstanding the fact that it has had as much as $300,000 committed to it by the Government, aside from the amounts that have been contributed to it by the Tennessee Valley Authority out of its treasury.
Mr. Tulloss. I am unable to explain that at this time. It may appear elsewhere in our records.
Representative WOLVERTON. Well, would you prefer that before you answer fully on the matter, that you be given an opportunity to look into it further, in some of your subsequent reports?
Mr. Tulloss. Yes, sir.
Senator SCHWARTZ. Mr. Chairman, I think possibly that Dr. Morgan, when he comes to the stand, will be able to give you a very full explanation of this transaction.
Representative WOLVERTON. I hope that Dr. Morgan is given a chance to make any explanations that he wishes, and all of the time that he needs to do it.
Senator ScHWARTZ. I think that the hope is well founded.
Representative WOLVERTON. That wasn't part of his purpose in coming; if it continues to be a matter of interest at that time, I think that it would be well to have his explanation of it because he was one of the incorporators. Of course, Dr. Harcourt Morgan and David Lilienthal could give it likewise.
Senator SCHWARTZ. They probably will, and the accountants. I think that we have demonstrated, in the expediency of time, that these witnesses don't know anything about it so that we will have to get some other witness.
Representative WOLVERTON. They have known enough about it to create curiosity on my part to know further about it, at least, and I appreciate the knowledge that they have given up to the present point.
Now, on page 111, I note there the enumeration of nine different cooperatives:
Brasstown Cooperative Committee, dealing with dairy and poultry products.
Carolina Mountain Cooperative Committee, dealing with seed potatoes, and vegetables, green and canned.
Newport Flour Mill, dealing with wheat and flour and corn meal, feed, and so forth.
The Farmers' Federation Knitting project, dealing with needle work and textiles.
Haywood County Cooperative Cannery, in the business of canned foods.
Farmers' Federation Cannery, Henderson ville, food and fruits.
Now, for what purpose are those corporations enumerated by the General Accounting Office in that statement, on page 111 in connection and under the heading of the Tennessee Valley Associated Cooperatives, Inc.?
Senator SCHWARTZ. May I ask the witness a question, just to clear my own mind? Those are the cooperatives that expended this $300,000, aren't they? Representative WOLVERTON. I assume so.
Senator SCHWARTZ. They are not cooperatives engaged in building rural lines; it is just relief cooperatives?
Representative WOLVERTON. I don't know about that relief, maybe you had better ask him.
Senator SCHWARTZ. I just wanted to illustrate what they were; you have got a cannery that is making canned goods; so that I can understand what is the matter with some of the canned fruits that I get.
Mr. TULLOSS. That is part of the financial statement, that is shown in the report. It carries some of the detail.
Representative WOLVERTON. Does that financial statement mean that the Tennessee Valley Authority has a direct connection with those cooperatives which I have just named?
Mr. TULLOSS. I understand that the moneys there reflected were allocated or paid to these activities enumerated; that is, they were paid out of the $300,000.
Representative WOLVERTON. I notice under the first column, a total allotment of $87,750. Is that from the treasury of the T. V. A.?
Mr. Tulloss. No, sir. Representative WOLVERTON. From what source did those cooperatives obtain those moneys?
Mr. Tulloss. From the $300,000 advanced to the cooperative association.
Representative WOLVERTON. Where does the balance of the $300,000 show on this statement?
Senator SCHWARTZ. It is $371,000. Mr. Tulloss. They had an item of $274,720.88 in cash at the time of the audit.
Representative WOLVERTON. How much is that; I didn't catch that. Mr. Tulloss. On page 109 it shows a cash item of $274,720.88.
Representative WOLVERTON. Would that be the balance that was left out of the $300,000 allotment to the Governor of Tennessee, after having given $87,750 to these cooperatives?
Mr. Tulloss. The $87,750 is an allotment. The next column shows the amount advanced, $25,754.12, which is shown below the first figure I gave you on page 109.
Representative WOLVERTON. In other words, the Tennessee Valley Cooperative made an allotment to these organizations that I have enumerated amounting in the total to $87,750, and advanced $25,754.12 on account of that allotment.
Mr. Tulloss. Yes, sir.
Representative WOLVERTON. And that a corresponding balance appears in the statement of the Tennessee Valley Cooperative amounting to $274,720.88.
Mr. TULLOSS. Yes, sir.
Representative WOLVERTON. Now, what has happened to that balance of $274,000 plus?
Mr. Tulloss. So far as I know at the end of this audit as of June 30, 1934, the money was on deposit as indicated here on page 109, namely, in the Hamilton National Bank, and the American National Bank.
Representative WOLVERTON. Well, is it still there?
Representative WOLVERTON. 'Well, why would you make reference to this matter and use a dozen or more pages in your report in 1934 and then not have any further knowledge of it? Is that merely because you don't have the memorandum before you, or did you mean that you lost all sight of it after this 1934 report?
Mr. Tulloss. I think it is because we haven't the next report to show what became of it.
Representative WOLVERTON. Would it be possible for you to have that information here after our adjournment at noon?
Mr. Tulloss. I don't know whether we can or not, sir.
Representative WOLVERTON. Well, let me state what I have in mind in the way of information to be obtained.
This Tennessee Valley Cooperative is a baby, so to speak, of the Tennessee Valley Authority; they brought it into being, and they named it, and they nurtured it by getting $300,000 from the President.
And your report indicates that a portion of that amount was allowed to some nine or more cooperatives, in the sum of $87,750, and that there was advanced $25,754.12. That is all that appears in this particular report.
Now, what I am interested in knowing is, is the fact whether or not the Tennessee Valley Cooperative still is in existence. If so, who are the officers of it? What has been done with the balance of the $274,000 plus that your balance sheet shows that they had on June 30, 1934; and also information with respect to these cooperatives that were given relief, as to whether they are still in existence, or whether they have been sold out to some individual-in other words, whether they are still operating as a true cooperative.
Now, that in a general way covers this situation that I have in mind that I think is necessary to have information on in order to make a complete picture of the Tennessee Associated Cooperatives.
I am also interested in knowing whether the Tennessee Valley Authority took any evidence of indebtedness for the moneys that it has advanced to these cooperatives, and whether the Tennessee Valley Cooperative has taken any evidence of indebtedness for the amounts that it has advanced to these cooperatives, and whether there has been any repayment made, either to the Tennessee Valley Authority or to the Tennessee Valley Associated Cooperatives by these cooperatives that are enumerated here, plus any others that may have been added in subsequent months. Mr. Tulloss. We will try to get that information for you, sir.
Representative BARDEN. May I just ask a question? You say this report that you have is the 1934 report? Mr. Tulloss. Yes, sir. Representative BARDEN. Is that the last report you have? Mr. Tulloss. Yes, sir. Representative BARDEN. You haven't 1935, 1936, or 1937? Mr. Tulloss. No, sir. Representative BARDEN. Have you that of the T. V. A.?
Mr. TULLOSS. No, sir. This is the last report we have on T. V. A.that is what I meant to say. This is mentioned in the T. V. A. report. We make no report on T. V. A. as such.
Representative BARDEN. Have you ever examined the books of this Tennessee Valley Cooperative Association?
Mr. Tulloss. We did for this year 1934.
Representative BARDEN What has happened since then you are unable to say?
Mr. Tulloss. I am unable to say.
Mr. TULLOSS. That is in the course of preparation. I don't know how long it will take us to complete it.
Our people just got back from the Tennessee Valley Authority bringing the audit, the field audit up to June 30, 1938, and we are now working on those several reports.
Representative BARDEN. Is the fact that you haven't any report since 1934 due to requests for a special audit, or is that the usual length of time that it takes to get those reports in?
Mr. Tulloss. This is the only activity that we have just this situation in, so I cannot say that we have any precedent for it. So this delay in making the report is, I would say, unusual because where we have made audit reports, we have been generally closer up to date, but we are in arrears in this case due to many circumstances. The principal reason is the fact that the cost of this audit was transferred from the Tennessee Valley Authority to the General Accounting Office. So in 1935 we had to cease operations until we obtained moneys for this audit. We had no moneys until after the ensuing fiscal year, and that caused an accumulation of work, and of course the resulting delay is due to an accumulation.